Broadband concerns for BT

BT's share of new customers in the increasingly competitive residential broadband market has dropped sharply, overshadowing strong profit growth in the first half.

The retail unit of BT had a 25pc market share of net additions for DSL broadband over the three months to September compared to 30pc during the previous quarter. BT has had to face renewed competition from Carphone Warehouse's "free" broadband service and a new service from BSkyB. At the end of September the group had 3m retail broadband customers.

Concerns over the flow of new customers to BT's residential broadband business led the shares to fall 2.5pc to 284½p this morning, making them the biggest faller in the FTSE 100.

The group's first-half earnings jumped 26pc as gains from IT service contracts and customers taking up more expensive broadband packages outweighed the decline in revenue from BT's traditional voice calls business.

Pre-tax profit for the six months to September was £1.24bn compared to £988m over the same period a year earlier. Revenue rose 3pc to £9.8bn.

The total number of broadband customers - which includes offices and businesses - jumped by 2.8m over the previous year to 9.3m at the end of September. New customers also tended towards the more expensive broadband packages, the company said.

For the second quarter, revenue from "new wave" - which includes BT's broadband customers and IT services contracts - took up 35pc of group turnover compared to 30pc a year earlier. BT has been pushing its "new wave" services amid declining revenue from traditional voice calls as prices fall with increased competition.

The group's IT services arm won £700m of new contracts over the second quarter, including a seven-year deal with Pepsi's international division.

BT said it made "good progress" on its NHS IT programme and is on schedule to meet its target of 18,000 connections to the system by March next year.

The group also increased average revenue per consumer household in the second quarter by £1 over the previous three months to £254 as customers upgraded their basic broadband packages.